Answer:
Lewis should recognize a gain on the exchane of $13,636
Explanation:
In order to calculate the amount of gain or loss should Lewis recognize on the exchange, first we have to determine the amount of gain with the followig formula:
Gain=Total value of the machine received-Book value of machine exchanged
=(cash received+fair value of machine received)- $950,000
=($100,000+$1,000,000)-$950,000
=$ 150,000
Next, In order to calculate the amount of gain or loss should Lewis recognize on the exchange we have to use the following formula:
recognize gain or loss=( <u> cash received )</u>× gain
cash received+fair value of equipment received
= (<u> $ 100,000 </u>)× 150,000
$100,000+$1,000,000
=$13,636
Lewis should recognize a gain on the exchane of $13,636
